A CEO's view: lead by example, and respect your people.

• Author: O'Neill, Paul (American government official)
• Position: Chief executive officer - Quality management - The Quality Struggle - From Two Angles

Paul H. O'Neill Chairman of the Board and CEO Alcoa

How does a company achieve an international competitive edge? At Alcoa, we think the key lies in quality. And quality means systematically taking apart the ideas of strategic analysis, strategic planning, and operational planning so that each is done separately.

As part of our quality process, we want to benchmark everything we do against the best practice in the world. So our strategic analysis begins with collecting and organizing data about what the best practice is. We know, for example, that the number of days an aluminum company can go before relining a smelting pot varies from 1,200 to a world's-best 3,200. Thus far, we've collected a body of data that tells us where everyone in the industry stands, what each company's experience is, where Alcoa stands in comparison, and what the fundamental economics of success or failure in each part of the business appear to be.

We put this information in the context of supply and demand, and add to it the degrees of freedom that Alcoa and its competitors have to expand into areas with good economic merit. So, on the front end of our quality planning is strategic analysis, taking into account not only our material's operating characteristics but our customers' alternatives. When we look at the aluminum can, for instance, we consider the customer's alternatives in glass, plastic, and steel, so we don't miscalculate the rate of productivity improvement Alcoa requires. In this particular case, we want to keep steel out and pursue the concept of replacing glass and plastic, taking into account the environmental and energy aspects, so that in the next step - strategic planning - we can begin to define the alternatives.

From strategic planning flows operational planning, which links where we're spending our money with where we're allocating our human resources to give us the best economic positioning. This process is complicated. When we first began, we had a difficult learning period because people weren't used to thinking about their work in such an orderly way. But now we're beginning to see the benefits of tying together the rational analysis process with the day-to-day operating plan. And every step of the way we need to emphasize quality in five key areas: safety, management, return to shareholders, compensation, and repairs.

1. Safety. Surprising to some in the financial community, I'm convinced a quality program begins with safety. It is not a given that people will be injured in the work-place. Achieving this standard of excellence isn't easy, but it is possible if you really understand your process and you operate under control all the time.

   To me, safety is the primary indicator of how well a company can lead globally. Alcoa, for instance, has the best safety record in the aluminum industry. Despite that record, we continue to stress the importance of safety, and we've managed to further reduce our serious-injury rate by 25 percent in the past three years. I think we can reduce it even more. It's not easy, though, when employees exhibit so much habitual behavior and, in my perception, a kind of Western macho-ness that enjoys "riding in the fear of danger." You have to convince your people that that kind of behavior is not in their own interest.

   We have a practice, called the Core...